The zombie coal plant
Environmentalists want to kill off Brayton Point. The Patrick administration says let the market do the dirty work.
Jay O’Hara didn’t have to see the gun to get spooked. The sound of the bullet hitting the chamber of a police officer’s rifle was enough. “I heard the bolt action of the rifle over my shoulder,” O’Hara recalls. “It wasn’t pointed, but it’s locked and loaded. It’s an unmistakable, chilling sound.”
O’Hara, a 31-year-old Cape Cod resident, had expected the heat. He and a fellow climate change activist, Ken Ward, had just piloted a 30-foot lobster boat, the Henry David T., up to the mouth of the Taunton River, and dropped anchor next to the massive Brayton Point power plant. Somerset’s Brayton Point is the largest coal-fired power plant in New England. The men lay at anchor just off Brayton’s dock, sandwiched between the power plant’s massive dockside pile of coal, and a 689-foot freighter, the Energy Enterprise, looking to add 40,000 tons of coal to that pile.
The pair sat in a boat named for Thoreau, the father of civil disobedience, flying a banner that read “Coal is stupid.” For 10 hours, as the Coast Guard and armed Somerset police officers and the baffled crew of the Energy Enterprise looked on, the Henry David T.’s crew prevented the delivery of coal to a plant that had burned 1.2 million pounds of the stuff in the year prior. “It is our intention to remain moored here to ensure that this coal is not brought in and burned in New England,” O’Hara radioed to the Energy Enter¬prise’s captain. The captain’s response: “Yeah, this coal is coming from the United States, West Virginia. What’s the problem with that?”
Those protests also stand out because, in addition to being enormous sources of greenhouse gas emissions, coal-fired power plants such as Brayton Point have faced immense financial hurdles lately. So instead of trying to tear down a behemoth like the 1970s nuclear industry, the anti-coal activists marching outside Brayton Point are trying to push the plant into a waiting grave.
Old-line coal plants such as Brayton Point are zombies shuffling through the Massachusetts electric market. Three coal plants in Massachusetts and Connecticut have shut down since 2011, and three other plants (one in Holyoke, and two in New Hampshire) appear to be on shaky financial ground, thanks to the flood of cheap natural gas that’s hit the market in recent years. They’re the walking dead, groaning and rotting and less than fully alive. And, as Brayton Point shows, they can be surprisingly tough to kill off.
Brayton Point’s new owner, the private equity firm Energy Capital Partners, recently filed for permission to close the coal plant in 2017. But the firm looks to be in the money until then. Energy Capital Partners bought Brayton for pennies on the dollar, and the plant has been doing decent business lately. It still has contracts to sell power to the grid through 2016. So although the death of New England’s biggest coal plant is now in sight, it will come paired with millions of pounds of burned coal, and a tidy profit. The environmental activists rallying against Brayton Point grew impatient with state officials, who have been content to wait for market economics to finish off the zombies. The market is squeezing coal out, but for some, the end is coming too slowly for comfort.
A dirty workhorse
Coal has been, historically, the workhorse of the Massachusetts power plant fleet. It’s also the dirtiest fossil fuel in the state’s energy portfolio.
|An aerial view of the coal-fired Brayton Point power plant in Somerset.
Coal releases an enormous amount of carbon dioxide when it burns. The 1990s-vintage natural gas power plants currently pushing coal to the sidelines emit carbon dioxide at roughly half the rate of coal; modern gas-fired plants are even more efficient. Coal also produces other harmful gases (nitrogen oxides and sulfur dioxide), heavy metals like mercury and lead, toxic ash, and carcinogens. During Brayton Point’s late ‘90s heyday, researchers at Harvard’s School of Public Health estimated that Brayton Point was responsible for thousands of asthma attacks and 106 premature deaths per year.
Marblehead state Rep. Lori Ehrlich got into local politics by way of public health activism, and she got into public health organizing because of coal. Ehrlich lives directly across the water from Salem Harbor Station, Brayton Point’s sister plant. She remembers her young daughters playing on the porch one day, tearing into the kitchen, and leaving “these little black footprints” all over her tile floor. “My first reaction was, I just cleaned the floor!” Ehrlich recalls. “Then I noticed the prints were really greasy, and I wondered, what did they bring in? I went out on the deck, and it was covered in a layer of black soot.” She called the plant’s owner at the time, Pacific Gas and Electric, and the plant sent an insurance adjuster to her house. A month later, the power plant operator offered to power wash Ehrlich’s deck, just as it frequently washed the greasy cars and detailed the soot-covered boats of Ehrlich’s Marblehead neighbors. “They missed the point,” she says. “It’s not about the deck. It’s about, what are my daughters breathing?”
The federal Clean Air Act grandfathered old coal-burning power plants out of meeting the government’s strictest air pollution controls, but federal and state environmental regulations have gradually brought pressure on plants like Brayton, which was built in 1963, to clean up or shut down. The Regional Greenhouse Gas Initiative cap-and-trade market pays plants that run cleanly, and drains cash from the northeast’s dirtiest power plants. Mystic Generating Station in Everett, once reliant on dirty oil-fired boilers, has shut down older generating units and repositioned itself as a natural gas-fired plant.
Environmental regulations carry compliance costs—especially for coal, an inherently dirty fuel. Tougher emissions standards aren’t game-changers on their own. But New England power plants have been facing stricter environmental regulations at a time when ample supplies of cheap domestic natural gas have turned the region’s electricity market upside down. According to data from the US Energy Information Administration, in 2008, gas-fired power plants in Massachusetts spent more than three times what coal plants spent on fuel to produce the same amount of energy; by 2010, the cost of natural gas had halved, while the cost of coal had risen slightly. Since gas-fired plants run far more cost-efficiently than coal-fired plants do, supplies of cheap natural gas have allowed gas-fired power plant operators to sell power more cheaply than rival coal plants. Coal, once the region’s dominant fuel, has been priced onto the sidelines.
“You hear all this stuff about Obama’s war on coal, and it’s nonsense,” says David Schlissel, a Belmont-based energy consultant. “It’s the economics of generating coal power. The real threat is gas, renewables, and energy efficiency all coming together. Throw it all in the hopper, and coal’s at risk.”
Coal’s fall has been swift and dramatic. In 2001, coal fueled 17 percent of New England’s electricity; in 2012, that figure had dropped to just 3 percent. These coal plants were built to run around the clock, but they’ve been running only sporadically, to supplement gas-fired power during spikes in electric demand. Between 2007 and 2012, Brayton Point’s electric output dropped by 76 percent. Holyoke’s Mount Tom coal plant saw electric generation drop by 90 percent between 2007 and 2011; its owners recently filed a bid to de-list from the regional electric auction—often the first step toward retiring the plant. AES Thames, a coal-fired plant just outside New London, Connecticut, filed for bankruptcy protection in 2011 and sits idle today. NRG Energy shut down Somerset Station, a plant two miles up the road from Brayton Point, in early 2011. Gas competition turned Dominion’s Salem Harbor plant into a money loser. Dominion wrote down the value of Salem Harbor to zero in late 2010, then shut down half the plant’s coal boilers, and dumped it at fire sale prices. Salem’s new owner, Footprint Power, is trying to convert the plant to gas power.
Coal plants aren’t alone in struggling to compete with cheap natural gas. New England’s once-robust oil-fired plants have been all but sidelined since the mid-2000s by the high cost of fuel. Nuclear power plants are seeing waves of closures across the country—including Entergy’s Vermont Yankee nuclear plant—because low electricity prices suddenly don’t allow them to keep up with their plants’ sizable maintenance costs. But coal’s fall is notable because of its magnitude—falling from nearly 30 percent of the Massachusetts market in 2001, to under 6 percent in 2012—and because of the sheer number of plants that are falling to market pressures.
“Sometimes companies claim major capital expenditures are causing plants to retire, it’s a capital event they can’t meet,” Schlissel says. “But a lot are retired just because the owners see the [profit] spread, and end up saying, this ain’t worth it.”
The anti-coal crowd
Brayton Point’s cooling towers dominate the surrounding landscape. The twin 500-foot cylinders stand taller than Boston’s Custom House tower. Dominion poured $550 million over the last several years into building the massive concrete structures, which divert wastewater from the coal plant’s turbine rooms away from the Taunton River and Mount Hope Bay.
The contrast between the cooling towers and the low-slung residential neighborhoods that surround the plant is visually jarring. But the first time Adam Greenberg arrived at the Somerset power plant, it wasn’t the scale of the place that got to him. Greenberg couldn’t get over the location of the town baseball field, which sits directly across the street from the coal plant. Greenberg met scores of climate change activists at the ball field this summer, for a protest march to Brayton Point’s front gates. The brevity of the march from ball field to coal plant was unsettling.
Greenberg, a 24-year old Milton native, is part of a burgeoning environmental movement that’s redefining the politics of energy in New England. It’s a movement that’s taking a confrontational approach to climate change in the region. This protest movement is demanding swift action, not gradual change. And its biggest target is the region’s most toxic power plant, Brayton Point.
New England’s other coal plants have either closed or faded in relative quiet. Salem Harbor, Somerset Station, AES Thames, and Mount Tom were all battered by market forces and hemmed in by groups like the Conservation Law Foundation on the regulatory front. Environmental groups worked to mitigate the coal plants’ impact by tightening pollution controls on the plants, and the economics of producing electricity in New England pushed the plants out of business.
Brayton Point is up against something completely different. Waves of protesters aligned with the 350 movement, a national network of climate-change activists working to slash carbon emissions, have descended on the plant; they’re arguing that Brayton is fundamentally at odds with the state’s anti-global warming laws, and they’re calling on Gov. Patrick to shut down the coal plant immediately. They have no interest in waiting on market forces to do the job. This year, they’ve rallied outside the plant, staged trespassing arrests at the facility, and set up solar panels and portable wind turbines in the shadows of the coal smoke stacks. In August, Greenberg and hundreds of other protesters staged a six-day march from Brayton Point’s front door to Hyannis, near the future site of Cape Wind.
“Brayton Point is bad for the climate and bad for health,” Greenberg argues. “Brayton’s such a massive emitter. It’s doing the most damage. Coal is harmful, it’s dangerous, and a lot of money is being spent to keep it in place.” Greenberg cites the Harvard study on premature deaths tied to Brayton Point’s emissions, arguing, “It’s not morally acceptable to wait for something bad to go away when we have the ability to act today. We have to give it a firm kick out the door.”
Jay O’Hara, who piloted the Henry David T. during the boat’s blockade of the Brayton Point coal dock, notes that there’s been a steady ramping up in activism around coal power in New England. O’Hara has been a grassroots climate change organizer for the better part of a decade. He had previously kicked around the idea of staging a protest action against trains delivering coal to the Mount Tom plant in Holyoke, or kayaking against coal freighters in Salem, but couldn’t get any traction. This spring’s Brayton Point protest was different. O’Hara and Ward’s blockade has galvanized other protests against the coal plant.
The blockade “was not civil disobedience,” O’Hara argues. “It was direct action. It was about, how do we say, this is what’s right, and this is what’s wrong? And show it by putting my body there? The question for me is, are we going to let our future be dictated by markets, or by people? Brayton is one of many, many problems out there, and if we’re going to solve the climate problem, we have to start shutting them down.”
The surge in environmental activism around Brayton Point exposes a sizable rift in the state’s energy and environmental policy. The state’s 2008 Global Warming Solutions Act commits Massachusetts to cutting greenhouse gas emissions to 20 percent of what they were in 1990 by the year 2050. It’s difficult to see how the state gets anywhere near that mark with coal power in the equation, given how dirty coal power is: This year, coal plants have accounted for 13 percent of the electricity produced in Massachusetts, but are responsible for 35 percent of all power plant carbon dioxide emissions. Still, state officials can only go so far in reshaping the energy market. The Patrick administration has been aggressive in creating renewable energy subsidies, and shoehorning projects like Cape Wind into the the state’s electric market. Ultimately, though, Patrick can’t give the Brayton Point protesters what they want. He’s relying on a combination of environmental regulations and market economics to push coal power aside. He can’t, and won’t, shut down Brayton on his own.
|The Henry David T., blocking a delivery of coal, carried a banner that said “Coal is stupid.”
“Governors don’t get to go around shutting down private businesses,” Patrick says. The governor argues that the state’s push on clean energy and energy efficiency has enabled the transition away from coal in Salem, and that, “over time, we won’t have the need for coal-firing plants.” At the same time, he insists, “As long as people want the electricity to come on when they flip the switch, we’re going to have to do this gradually.”
State Rep. Patricia Haddad, the high-ranking lawmaker from Somerset, bristles at the sight of out-of-town activists descending on the coal plant. “There are some who would say government is too intrusive, now we want to go shut down this business?” she says. Brayton Point’s owners, Haddad argues, are “going to have to make money before they can pour money into the plant and do something different. The market is going to drive this. It’s not going to be a snap of the fingers.”
END COMES SLOWLY
The deregulated Massachusetts energy market responds to classic economic forces. Coal power landed on the ropes in New England, not because environmental and public health advocates now have a greater appreciation of its ills, but because it can’t compete with natural gas. The basic assumption behind Massachusetts’s climate goals is that, given the right combination of environmental regulations and clean energy subsidies, the free market will bury coal.
The fall of Salem Harbor, Somerset Station, Mount Tom and Connecticut’s AES Thames seemed to confirm the state’s basic bet, that it could count on market forces to deliver a coal-free environment. Brayton is heading down a similar path, but on a far different timeline. The plant will close in 2017, but not before its new owners squeeze out the last remaining drops of profit. Closure lies behind a huge pile of burned coal.
Competition from natural gas crippled Brayton Point, and saddled the plant’s former owner, Dominion, with substantial losses. As it did in Salem, Dominion recently decided to cut its losses, selling Brayton Point to a private equity firm from New Jersey. The Salem Harbor sale resulted in the plant’s shutdown and likely redevelopment into a gas-fired facility, but at Brayton, it appears that the fire sale has given the troubled plant a stay of execution. Brayton Point isn’t the behemoth it once was, but until it closes, it remains somewhat profitable.
Dominion bought Brayton Point, Salem Harbor, and a small gas-fired plant in Providence in 2005, for $642 million in cash. Brayton, which is more than twice as large as Salem, was the prize. Within a few years, competition from natural gas turned the deal upside down on Dominion. The company’s annual reports show that Salem lost money in 2010, 2011, and 2012; Dominion eventually wrote down Salem’s value to less than $1 million, based on the plant’s inability to make money, and dumped it overboard in 2012. Dominion put Brayton Point up for sale in late 2012, shortly after shedding Salem. Months later, the Conservation Law Foundation issued a report on Brayton’s financials that reads like an obituary.
The CLF report, co-authored by Schlissel, the Belmont-based energy consultant, outlined a bleak financial future for Brayton. The plant was losing the fight with natural gas, and running at a fraction of its capacity. The plant’s earnings had dropped from $345 million in 2009, to around $24 million in 2012, at a time when the plant was wrestling with $1 billion in new costs—the plant’s new cooling towers and air pollution scrubbers. The size of those improvements, Schlissel argues, shows how quickly the ground shifted under Dominion: In 2005, Brayton Point was worth a billion-dollar upgrade, but not long after those improvements came online, Dominion sold Brayton “for piddling,” he says. Brayton and a pair of midwestern power plants netted Dominion $472 million, but industry observers believe that Brayton was a throw-in to the sale—the property that the buyer, Energy Capital Partners, had to take to get the others. The sale closed earlier this year.
Energy Capital Partners, Brayton’s new owner, is a private equity fund that invests in energy firms. It owns a handful of natural gas-fired power plants in New England, but Brayton is the firm’s first foray into coal power. It hasn’t said much about its plans for Brayton, other than to blame the plant’s 2017 retirement on a failed bid to secure above-market electricity prices. Some energy observers believe ECP will transition Brayton to gas power, as is happening at Salem. Until that happens, though, Brayton could be a profitable short-term investment. Dominion ate the $1 billion tied to Brayton’s cooling towers and scrubbers. Except for the cost of the scrubbers and cooling towers, Brayton was never unprofitable, as Salem was. Dominion sold because it didn’t anticipate making the huge profits it would need to make its $1 billion back. Energy Capital Partners can tolerate the thin profits that CLF projected for Brayton over the next several years, because the firm doesn’t have much invested in the plan in the first place.
More importantly, Brayton Point is suddenly a lot busier than it was just a few months ago. It produced almost as much energy in the first half of 2013 as it did in all of 2012. After accounting for a scant 6 percent of the Massachusetts power market last year, coal has fired 14 percent of the state’s power this year. That’s still a far cry from where coal stood before the shale gas boom, but it’s also a big uptick off the lows that drove other coal plants out of business. Brayton was busy in the cold winter months, when a spike in natural gas prices meant that older coal plants like Brayton could suddenly compete on price. Schlissel believes a similar dynamic may come into play this winter. Brayton also successfully bid in to ISO New England’s 2016-2017 energy auction. The successful bid means that, unlike plants like Mount Tom, Brayton’s new owners should be able to compete on electric prices with gas—at least during portions of the year.
In the long run, argues Shanna Cleveland, a staff attorney with the Conservation Law Foundation, cheap natural gas and aggressive energy efficiency programs will put downward pressures on energy prices, making it difficult for expensive old coal plants to compete. “We firmly believe,” she says, “there’s no profit in burning coal. It’s the same conclusion power plant operators around the country have come to.” Schlissel adds, “The region is fairly aggressive on energy efficiency, and there’s more wind coming, more solar, so I’d say there’s a lot of uncertainty, a lot of risk. A lot of risk.”In the short term, though, industry observers believe the combination of forward contracts, low investment costs, and seasonal spikes in demand make the plant somewhat profitable. Energy Capital Partners can afford to take a long view on the plant’s future because they’re making money now.
Across town, the shuttered Somerset Station power plant sits dark, ringed by rusty fences, and abandoned. The coal plant’s new owners took control of the facility less than two years ago, and the property is already in foreclosure, hundreds of thousands of dollars behind on its property taxes, and heading for the auction block. At Brayton Point, though, coal’s death march has slowed to a crawl. The freighters still tie up at the mouth of the Taunton River and offload coal by the ton. In fact, Brayton has been busy enough this year that it has reclaimed an ignominious title it had recently lost: that of New England’s biggest power plant polluter.